For Venture Firms, Zipcar Purchase a Profitable but Disappointing Exit

Venture-capital investors in car-sharing service Zipcar Inc. will likely make a profit from Avis Budget Group Inc.’s buyout for about $500 million. But the returns are hardly what these firms hoped for when they invested years ago.

In the dozen years before Zipcar went public in April 2011, it raised nearly $70 million from venture investors who looked for the company to upend the car-rental market and turn itself into a multibillion-dollar business.

Everything looked promising on IPO day when Zipcar’s shares rose by more than half to $28 a share, giving the Cambridge, Mass., company a market value of more than $1 billion. Three of Zipcar’s largest investors, Revolution, Benchmark Capital and Greylock Partners, didn’t sell shares in the offering—a show of faith that proved a misstep in hindsight. Smedvig Capital did avoid the later crunch by immediately selling some 900,000 shares for $16.4 million.

While Zipcar arguably redefined the way urban dwellers commute, it is far from prosperous.

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